Spotify hits 50 million subscribers

Sia is one of the most popular artists on Spotify

Spotify has become the first music streaming service to pass 50 million paying customers.

It reached the milestone after adding 10 million subscribers in less than six months, staying ahead of its closest rival, Apple Music.

But Spotify - which costs £10 a month in the UK - faces competition from deep-pocketed tech giants Amazon and Google, as well as Apple.

It is also yet to reach a new licensing deal with record labels, analysts say.

Mark Mulligan, a music industry analyst at Midia Research, said: "Spotify is the standout success for streaming music globally - no one else comes close in terms of paid subscribers."

Apple Music had about 20 million subscribers by December 2016, 18 months after launching.

Lagging some distance behind are Deezer and Amazon Music, although the latter is "making up ground fast", Mr Mulligan said.

Rapper Wiz Khalifa performs at the Spotify best new artist awards

The problem for Spotify is that Apple and Amazon have millions to spend on streaming and neither need to make a profit from the service, Mr Mulligan added.

Google has also invested in its streaming service, Google Play Music, by making more songs available offline and using artificial intelligence to draw up better playlists.

'Tortuous talks'

Spotify, which may list its shares on the stock market next year, is yet to post a profit despite reporting 80% growth in revenues in its latest annual results.

The company is also still dealing with "tortuous" licensing negotiations with music companies, Mr Mulligan said.

About 80% of Spotify's cash flow is currently spent on licensing payments to record labels, he said. "If it's going to IPO [initial public offering], it's at least got to have a good story about that."

Apple Music has seen huge growth since it launched in June 2015

Spotify has rejected suggestions that its subscriber growth is slowing.

The firm increased its paying customer base by a quarter between September 2015 and the start of this month, down from 33% in the previous six months.

Spotify chief executive Daniel Ek said that needed to be "put in context".

"More than absolute Netflix subs[criber] growth, and relative growth higher too," he wrote on Twitter on Friday. Netflix added 9.2 million paying members in the final six months of 2016, a growth rate of 11.5%.

As Spotify expands, it will become more difficult to keep the growth rate up, but for now it is still enlarging the market and outpacing many of its rivals.

"Spotify has a good shot at another really good year, but after that, growth might be harder," Mr Mulligan said.